Inter CAFE

International Centre for Applied Finance and Economics

Title : WHY WAS THERE A PRECRISIS CAPITAL INFLOW BOOM IN SOUTHEAST ASIA?
Authors : RAMKISHEN S. RAJAN, REZA SIREGAR and Iman Sugema
Publisher : Published online inWiley InterScience (www.interscience.wiley.com). DOI: 10.1002/jid.962

Much of the recent literature on the East Asian crisis of 1997–98 has focused on the sudden capital reversals and the accompanying regional bust. An oft ignored fact is that the bust was preceded by a prolonged boom period. This boom was fuelled primarily by largescale capital inflows throughout the early 1990s, a significant proportion of which was intermediated via the domestic banking sector. Motivated by this observation, along with the recognition of the importance of the credit (bank lending) transmission channel in the crisishit Southeast Asian economies, this paper concentrates on the precrisis capital inflow boom to emerging economies.

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Title : Government Bailouts and Monetary Disequilibrium: Common Fundamentals in the Mexican and East Asian Currency Crisis
Authors : RAMKISHEN S. RAJAN and Iman Sugema
Publisher : North American Journal of Economic and Finance

Monetary disequilibrium seems to be a common thread that connects the Mexican and East Asian crises. Both crises have been characterized by governments attempting to minimize the adverse impacts of capital reversals on their domestic financial systems. This backstopping function of the monetary authority is modeled within an escape clause-based currency crisis framework which emphasizes the “nonmechanical” behavior of gevernments as they trade off various economic policy objective.

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Title : Testing purchasing power parity in a multivariate cointegrating framework
Authors : FRANCIS IN and IMAN SUGEMA
Publisher : Applied Economics, vol. 27, pp. 891-899

This paper examines a bilateral PPP (purchasing power parity) relationship between Australia and the 11 major trading countries by means of two alternative econometric techniques – a multivariate cointegrating framework and a band-spectral regression. It is acknowledged that there is no strong evidence that classical PPP holds in all cases. However, the generalized version of PPP holds in all cases, and provides a better explanation of the long-run relations between exchange rates and relative prices. The use of different price indices, i.e. CPl and WPI, lead to different estimates and hence different policy implications.

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